The materiality assessment results are summarised in the materiality matrix below which shows the relationship between megatrends, material topics and relevant sub-topics.
Reinforcing resilience in a changing operating environment
Pursuing energy growth opportunities in our core markets
Aligning business activities with community, employee and customer expectations
Building an agile and innovative workforce
Providing customers with reliable and reasonably priced energy
Navigating geopolitical instability
Acting as a trusted partner in the clean energy transition
Investing in clean electricity infrastructure
Reducing environmental impacts
Responding to evolving regulatory landscapes
Building resilience in the face of climate change and an evolving business environment
Reinforcing cyber resilience and data protection
Developing Energy-as-a-Service business models
Deepening CLP’s value proposition with the right partners
Creating new earnings streams as other sectors electrify
Deploying customer-facing energy solutions
Fostering organisational agility
Upholding human rights in the supply chain
Promoting workplace safety and wellbeing
Attracting and retaining future talent
Enhancing technical and digital capabilities
Financially material topics
Impact material topics
MATERIALITY ASSESSMENT
Materiality Matrix
This interactive map shows the results of the double materiality assessment.
MEGATREND
Deglobalisation
Sealed borders and trade disruption caused by the pandemic fuelled indications that globalisation may have peaked. There will be no easy return to the unfettered movement of people, goods, capital and ideas; COVID-19 has established a bias towards self-reliance. As the world deglobalises, regional integration grows stronger. Many nations are focused on reshoring critical manufacturing and building greater resilience in their supply chains. Businesses are facing greater regulatory and investment uncertainty as a result.
MEGATREND
Accelerating energy transition
As the world settles into a new “normal”, the transition to a clean energy future remains a priority for governments and business alike. Washington’s recommitment to climate leadership has helped catalyse global action, while the new Australian Government has promised to turn the country into a “renewable energy superpower” and end the “climate wars”. Globally, renewable capacity is set to break another record, with renewable capacity increasing over 8 percent in 2022 to reach almost 320GW. Change in technology, too, has never happened so fast, nor has it been so transformative. In the utilities sector, Artificial intelligence (AI) is driving efficiency gains, helping deliver a better customer experience, and underwriting the next generation of clean energy and storage technologies.
MEGATREND
Climate change adaptation
Societies and economies must increase their resilience to adapt to a hotter climate. The 2022 Global Risks Report ranks extreme weather as the second most likely of the adverse risks facing the planet. Climate action failure is first. COVID-19 foreshadows what the climate crisis could look like: systemic, fastmoving, and global. At worst, unmitigated global warming could result in catastrophic scenarios that outstrip any capacity to adapt. The energy sector is especially vulnerable to physical climate risks, but leading utilities will also be critical to future adaptation solutions.
MEGATREND
Technology as enabler and disrupter
Artificial intelligence (AI), digitalisation, automation and advanced robotics are shifting the way we work, live, and interact with the world around us. The COVID-19 pandemic has accelerated this trend, with companies forced to expedite the digitalisation of their operations and customer interactions. In the utilities sector, for example, AI is driving efficiency gains, underwriting the next generation of clean energy and storage technologies, and helping deliver a better customer experience.
MEGATREND
Evolving energy business models
The falling cost of renewables and the introduction of new technologies is powering the shift towards an intelligent, integrated and more decentralised energy system. Utilities are exploring new business models and capabilities in areas such as microgrids, storage, electric vehicles (EVs) and energy-as-a-service. Incumbent electric utilities face competition from non-traditional utilities including big tech, communications providers, oil companies and EV manufacturers. Each has identified opportunities to integrate energy products and services into their customer value proposition.
MEGATREND
Electrification
The demand for electricity is set to increase by more than 2.5 times by 2050, driven by urbanisation and the massive electrification of end-use sectors, such as transport and industry. Despite the increasing availability of renewable energy generation, growth is unable to match increasing demand. Increases in energy needs also creates additional strain on energy grids, especially at times of peak demand, with widespread clean electrification limited by current energy infrastructure. In IEA’s Net Zero by 2050 roadmap, the current US$260 billion annual investment in transmission and distribution grids will need to expand to US$820 billion by 2030.
MEGATREND
Future of work
A rapid increase in the availability and use of digital collaboration tools is accelerating a structural shift in the way people work, communicate and organise their lives. In response, companies are paying closer attention to worker health, wellbeing and morale. In addition, the benefits of a flexible, digitalised, diverse and inclusive working environment have become increasingly clear, particularly in relation to attracting and retaining talent. However, more than 50 percent of workers currently remain tethered to physical job sites, limiting their access to the benefits of the future of work enjoyed by others.
MEGATREND
Data privacy and security
The mass adoption of working from home has increased the number of vulnerabilities for cyber criminals to exploit. Cybercrime damage is predicted to reach US$10.5 trillion by 2025. Critical infrastructure targets such as electricity grids, power plants and dams are particularly vulnerable to attack. Data privacy is similarly in focus. Greater regulatory scrutiny, increasing incidents related to the release of personal data and changing consumer privacy expectations have forced companies to reconsider how customer data is collected and used.
MEGATREND
Trust and fairness
For many nations, trust in the institutions of government and media is changing. Pressure is mounting on business to address major social, environmental and technological challenges such as wealth disparity, climate change and job automation. In addition, companies are increasingly scrutinised for human rights violations in their supply chains. This shift towards a more purpose-driven approach to private enterprise is a global phenomenon and will have implications on how companies retain customers, employees and capital. Governments are also looking to adjust economic and social policies to lessen social inequality. China, for example, has announced a Common Prosperity initiative to raise living conditions for low-income workers.
MATERIAL TOPIC
Bolstering energy security and reliability
The world is in the midst of an energy crisis, triggered by an uncertain geopolitical environment and enduring supply chain disruptions. Escalating fuel prices have resulted in assets running at reduced capacity, which has increased costs for CLP and its customers alike. The Group must balance two vital and sometimes competing objectives: providing customers with secure, reliable and reasonably priced energy while continuing to make rapid progress on decarbonisation objectives.
Financial Materiality
Shortages in coal and gas could impact CLP’s profit margins by driving up input costs and forcing assets to run at reduced capacity. CLP may be able to benefit in the short term from increased demand for fossil fuel generation, but the larger commercial opportunity lies in leading a faster transition to renewables to support long term energy security.
Impact Materiality
CLP’s customers and the global economy will be adversely impacted in the short to medium term by increased fuel prices. A slower transition caused by an increased reliance on fossil fuel generation will also negatively impact the environment.
Key stakeholders
Customers
Communities
Governments
The environment
Suppliers
Shareholders
MATERIAL TOPIC
Shaping and executing the transition to net zero
CLP’s growth opportunities are positioned around becoming a Utility of the Future. In pursuit of this ambition, CLP is ecarbonizati its existing asset base, investing in clean electricity infrastructure, ensuring the delivery of reliable and reasonably priced energy, and acting as a trusted partner for governments, communities and customers in the transition to a just, fair and clean energy future.
Financial Materiality
Policies in most markets are moving towards the ecarbonization of economies. CLP must respond accordingly to remain competitive. Its focus is on reducing stranded asset risk for fossil fuel-powered assets, and supporting its reputation as a responsible energy provider. Investments in non-carbon assets and transition enablers are drawing increasing interest from a broad spectrum of investors who share CLP’s climate vision objectives, creating the environment for CLP to attract capital and gain support from the insurance market. Also enhanced is the Group’s attractiveness as a commercial partner for private sector and government joint ventures.
Impact Materiality
The lower emissions that result from the transition to net-zero benefit the environment, and by extension the community, through lower greenhouse gas (GHG) emissions. CLP’s investment in the utility-scale use of clean energy solutions also supports the economy by facilitating major investment in critical supply chains and infrastructure.
Key stakeholders
Government & regulators
Communities
Customers
MATERIAL TOPIC
Reinforcing resilience in a changing operating environment
The accelerating pace of environmental, technological, regulatory and social changes have reinforced the importance of business resilience. CLP recognises the strategic value of anticipating, withstanding and learning from disruptive events, especially in response to the growing threats posed by climate change and cybercrime.
Financial Materiality
Business resilience is an important component of sustainable value creation and helps protect CLP’s assets and cash flows. Negative risks associated with damage to physical assets and operations caused by global warming and cybercrime require careful management. As countries begin to plan for a post-pandemic future, CLP has a role to play in rejuvenating the economies in which it operates.
Impact Materiality
Reinforcing resilience in CLP’s assets and operations underpins a stable and reliable energy supply. This benefits communities and the economy by minimising disruption.
Key stakeholders
Customers
Suppliers
Communities
Employees
MATERIAL TOPIC
Pursuing energy growth opportunities in our core markets
The different regulatory environments in each market affect CLP’s growth opportunities locally. Opportunities in Mainland China, especially in the Greater Bay Area (GBA), are significant for CLP due to the region’s large population, proximity to CLP’s home market of Hong Kong, and increasing cooperation with the GBA. CLP is working with public and private sector partners to: accelerate the clean energy transition in line with government objectives; scale up clean electricity generation to meet rising demand as other sectors electrify; and introduce new energy products and services that serve customer needs.
Financial Materiality
Electricity demand is expected to increase as specific market segments electrify, presenting opportunities for CLP to access new markets, establish partnerships in high-growth segments, and diversify earning streams. CLP operates in different geographies, allowing it to attract capital, technology and talent globally. The energy transition presents new opportunities to CLP through customer-facing solutions and expansion into high-growth market segments by providing different energy services, such as district cooling.
Key stakeholders
Shareholders
Customers
MATERIAL TOPIC
Aligning business activities with community, employee and customer expectations
As a purpose-led business, CLP recognises its obligation to meet evolving stakeholder expectations around the positive role businesses can play in society. This includes empowering end users by offering decentralized energy solutions that meet their needs and collaborating with partners to deliver clean energy solutions that benefit customers, communities, and the environment. Employee and supplier wellbeing is also a priority. CLP recognised that its long-term success relies on its capacity to build an agile, diverse, inclusive, and ethical work culture capable of attracting the highly-skilled talent needed to build a Utility of the Future.
Impact Materiality
Business activities which meet the expectations of stakeholders benefit employees, customers, suppliers and local communities. Additionally, an economic system that respects and upholds non-financial value creation (such as social value) is likely to be fairer and more resilient over the longer term.
Key stakeholders
Customers
Communities
Employees
Suppliers
MATERIAL TOPIC
Building an agile and innovative workforce
The successful execution of CLP’s strategy depends in large part on its employees’ ability to adapt to evolving industrial, technological, and demographic trends. As a result, the Group is investing in attracting and retaining a diverse, multi-generational and digitally-adept workforce capable of swiftly navigating change and meeting customer needs. Workplace safety is another key consideration.
Financial Materiality
Fostering an agile, innovative and safe work environment increases the quality and productivity of CLP’s workforce. Enhancing technical and digital skills within the business is necessary to capture growth opportunities in China and supports the uptake of new business models. Gender and ethnic diversity also increase the likelihood of financial outperformance.
Key stakeholders
Shareholders
Employees
SUBTOPIC
Providing customers with reliable and reasonably priced energy
While customer expectations around technology and sustainability continue to shift, the need for reliable and reasonably priced energy remains constant. Mitigating the impacts of the current global energy crisis on consumer prices in the short term and maintaining reliability while navigating the accelerating energy transition over the longer term, is key for CLP as a provider of essential energy services.
Financial Materiality
International fuel prices have been highly volatile which could substantially impact CLP’s customers. While decarbonising its operations, CLP also understands that electricity services are essential. It is a priority to provide customers with reliable and reasonably priced energy.
CLP’s customers and the markets in which CLP operates have been adversely impacted by high and unstable energy prices. CLP exercised prudent cost management while ensuring reliable access to energy. Enabling the uninterrupted operation of key services needed to maintain societal and economic functioning has positive impact on people, the environment and the economy.
US-China tensions, COVID-19, inflationary pressures, and war in Ukraine have disrupted global supply chains and increased the pace of deglobalisation. In an increasingly unpredictable global environment, CLP's ability to procure critical technologies, as well as capital, commodities and other key inputs, may be negatively impacted.
Financial Materiality
Rising geopolitical instability could undermine the free flow of people, goods capital, and ideas from which CLP has long benefitted. Regional investment opportunities outside of Hong Kong and Mainland China could dry up as stakeholders in other markets face real or perceived pressure to decline certain types of foreign direct investment. This has potential implications for CLP’s cost of capital, growth prospects, diversification strategy, and ability to source foreign investment, talent, technology, and joint venture partners.
The world is in the midst of an uncertain geopolitical environment which created shockwaves over the year and continues to reshape the business landscape. CLP monitors the evolving energy market and assesses how changes in CLP’s external environment might hold back or support the Group’s strategy as well as its progress on decarbonisation objectives.
Acting as a trusted partner in the clean energy transition
Governments, regulators, communities and customers are committing to ambitious decarbonisation agendas in each CLP market. As a provider of reliable, reasonably priced and increasingly low-carbon energy, CLP acts as a trusted partner in the transition to a just, fair and clean energy future.
Financial Materiality
Maintaining trusted partner status preserves CLP’s social licence and reputation, increases the attractiveness of forming joint ventures to deliver society-wide decarbonisation, and reduces regulatory risk. This position improves CLP’s ability to enter new markets, increases customer retention and improves understanding of the trade-offs between a low tariff and greener energy. It also helps CLP attract capital at lower cost, such as via green finance opportunities.
Support for the decarbonisation agenda impacts positively the environment and the broader community, by helping to reduce air emissions, water use and waste while also ensuring the continued supply of reliable and reasonably priced electricity and energy services. CLP’s role as a trusted partner in the zero-carbon transition also supports the economy by making energy systems more efficient and resilient, and by decoupling generation and distribution from extractive, non-renewable and polluting fossil fuels.
Investing in clean electricity infrastructure ensures future electrification will come from efficient, low-carbon sources. Investment throughout the energy value chain will make the grid more resilient and reliable despite rising electricity demand due to greater overall dependence on electricity.
Financial Materiality
Large upfront capital expenditure for clean electricity infrastructure will impact CLP’s short-term financial position. However, the low marginal costs of renewables and customer willingness to pay a premium for clean electricity will result in investments becoming fully amortised over time. During the transition, CLP will continue to invest in gas-fired infrastructure, in readiness for the transition to green hydrogen when it becomes commercially viable.
Investing in clean energy infrastructure benefits the broader community by reducing the combustion of fossil fuels, thus reducing the negative impacts of air pollution and climate change. In addition, investment in clean energy infrastructure also benefits the economy by helping establish new industries.
Degradation of natural resources and ecosystems is having significant impacts on societies and economies. Reducing environmental impacts in local ecosystems where CLP operates is needed to adhere to tightening environmental regulations and increasing investor and societal expectations.
Impact Materiality
Effectively minimising environmental impacts from power generation is one of CLP’s commitments as a responsible power utility. This is fundamental for upholding a social licence to operate and to ensure the maintenance of ecosystem services for sustainability. Conservation of biodiversity has a direct positive impact on local economies by protecting ecological processes and influencing critical industries, such as agriculture and food production. Stakeholders in focus Customers, communities, business partners and governments
Effective progress in decarbonisation must factor in evolving government expectations within the markets where CLP operates. Regulatory uncertainty and increasing competition may exacerbate risks associated with transition to new operating models.
Financial Materiality
Regulatory uncertainty and sometimes contradictory government ambitions limit CLP’s ability to execute long-term planning and strategic decision-making, and increase the risk of regulatory and non-compliance costs. Continued alignment enhances CLP’s attractiveness as a partner for governments. It is vital that CLP participates in dialogues relating to government policy decisions.
CLP’s collaboration with governments and regulators positively impacts the environment by reducing emissions. By contrast, misaligned agendas would increase the environmental, social, and financial costs of the energy transition for governments, customers, and communities.
Building resilience in the face of climate change and an evolving business environment
To ensure a reliable, reasonably priced and sustainable supply of energy, CLP must address the challenges that natural resource constraints and extreme weather conditions pose to physical assets. While investment is needed to manage physical climate risks, innovative adaptation practices also present opportunities to create demonstrable value.
Financial Materiality
A failure to adequately address the impacts of climate change on operations could result in damage to physical assets, increasing the likelihood of supply disruption, and rising insurance costs. Some adaptation solutions offer opportunities to maximise revenue generation through increased efficiency, greater diversity of energy supply, and meeting new customer requirements.
Adapting CLP’s physical assets to cope with the disruptive realities of climate change benefits the economy by maintaining a reliable energy supply, even in the face of extreme weather events. By promoting resilient operations, CLP can also support the energy needs of vulnerable communities who are particularly susceptible to physical climate risks such as sea-level rises and outages caused by storms.
Threats to operational technology (OT) are especially important for companies like CLP, which provide critical infrastructure. Governments and customers are increasingly concerned about how personal information is stored, protected and used. The financial and reputational cost of a major information technology (IT) breach can be prohibitive.
Financial Materiality
A cyberattack could cause an outage of CLP’s IT systems, leak sensitive customer information or confidential company data, lead to financial losses through fines, legal damages, or ongoing credit monitoring for affected customers. A cyberattack on CLP’s OT could cause severe service interruptions resulting in wider economic impacts and significant reputational damage.
Because of CLP’s role in providing critical power infrastructure, a significant cyber security breach could have a massive impact on local economies by temporarily shuttering essential energy services. Cyber resilience and effective data protection measures allow employees and customers to proceed with their activities without fear or threat of cyberattack.
Residential and commercial consumers are demanding more personalised and customisable offerings from utility service providers, including how their energy is generated, allowing them to manage and monitor usage in real time. Advances in technology are enabling energy-as-a-service business models, including power purchase agreements, battery storage and charging facilities, and demand-side management. These models combine hardware and software services, giving consumers greater flexibility and choice, and promote the adoption of renewable energy sources.
Financial Materiality
Energy-as-a-service business models are expected to deliver reasonable margins, scalability, and long-term customer relationships. CLP’s earnings will be supplemented by such asset-light business models.
Deepening CLP's value proposition with the right partners
The utilities sector faces challenges from regulatory changes, emerging technologies and new market entrants. Partnerships between leading utilities and new market entrants develop synergies that deliver better and more innovative customer solutions. CLP can add significant value by delivering clean energy infrastructure that can respond quickly to variability, and offer better energy optimisation solutions.
Financial Materiality
Partnerships unlock growth opportunities in high-value market segments which are beyond the traditional electric utilities value chain, such as data centres or district cooling. Conversely, businesses attempting to operate in isolation are sacrificing future growth areas, losing opportunities to deepen their value proposition and insulate themselves against new market entrants.
Creating new earnings streams as other sectors electrify
Electricity demand is set to increase dramatically as more industry sectors electrify. CLP can enable transition to a low carbon economy by scaling up clean electricity generation to meet demand. In addition, electrification presents opportunities to expand into new parts of the energy value chain, such as energy-as-a-service and other energy management services.
Financial Materiality
Wider sector electrification will provide opportunities to access new markets and earning streams, enhancing CLP’s attractiveness to investors not only through non-carbon generation assets, but other electricity infrastructure supporting distributed and variable generation sources.
Technological breakthroughs are enabling decentralised energy systems that empower consumers to take control of their energy needs. CLP is well positioned to support this transition by deploying customer-facing energy solutions, including EV charging stations, smart meters and battery storage. Developing decentralised energy solutions opens up new growth opportunities, while helping CLP build long-term relationships with end users.
Financial Materiality
Developing decentralised energy solutions creates opportunities for CLP to expand into new business lines and diversify revenue streams. By offering ‘high-touch’ customer solutions, such as charging stations and smart meters, CLP can raise its brand profile and build stronger customer relationships. Leveraging these opportunities allows CLP to improve its strategic resilience against new market entrants.
Supporting decentralised energy solutions benefits people by enabling flexible, reliable and cost-effective access to clean energy. Delivering better end-use solutions, in turn, benefits the environment by reducing per capita GHG emissions and curbing long-term physical climate risks.
CLP’s success is based in large part on the quality, morale, and productivity of its human capital. The CLP workforce benefits from a culture that is open to new ideas and ways of working, and which celebrates diversity and inclusivity in all its forms.
Impact Materiality
Organisational agility allows CLP to respond to a changing energy market and to the social and geopolitical uncertainties that continue to reshape its business landscape.
The responsibilities of a company should not be constrained within its own operations. Moreover, human rights due diligence is a critical input in managing supply chain risks. In becoming a Utility of the Future, CLP continues to promote supply chain transparency as a competitive advantage. CLP recognises its responsibility to eliminate all forms of modern slavery and labour exploitation in its operations and throughout its supply chain.
Impact Materiality
Human rights due diligence is critical in managing supply chain risks. In becoming the Utility of the Future, CLP continues to promote supply chain transparency as a competitive advantage and recognises its responsibility to eliminate all forms of modern slavery and labour exploitation.
Employees, service providers, contractors, customers and members of the public alike desire safe CLP workplaces which support psychological wellbeing and physical health.
Financial Materiality
Ensuring health, safety, and wellbeing enhances CLP employee productivity and improves business efficiency. Conversely, non-compliance increases the prospect of lawsuits and financial sanctions from industry regulators. It also damages brand, reputation and social licence.
CLP’s strong performance in this topic benefits its people by protecting the health, safety and wellbeing of workers in all CLP locations. Safe operations, such as minimising the risk of COVID-19 virus transmission, also benefits the communities in which CLP operates.
Creating the right working environment is critical to attracting and retaining the diverse and highly-skilled talent needed to build a Utility of the Future. Employees will also need to adjust to new ways of working, such as flexible and remote work, and develop appropriate skills for an increasingly digitalised and decentralised workplace.
Financial Materiality
CLP aims to have the right capabilities to respond successfully to fast-moving trends and remain competitive. Attracting the right talent also drives organisational agility, enhances employee productivity and improves efficiency.
CLP is recognised for its expertise in hardware and engineering. However, as digital technologies evolve, customer expectations increase. Electric utilities are under pressure to develop the technical capabilities necessary to attract and retain an increasingly sophisticated and empowered customer base.
Financial Materiality
Developing and maintaining strong technical and digital capabilities will ensure CLP can execute its business strategy. Utilities responsive to evolving customer preferences and emerging technologies, such as blockchain and batteries, have an opportunity to enhance sales and diversify revenue streams.
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